This survey explores the risks facing the microfinance industry at a time when upheavals in global financial markets are adding to the pressures of change in the sector, raising new and unfamiliar challenges.
Originally a small-scale, philanthropic movement to provide credit to the neediest, microfinance (MF) has grown enormously in recent years and is now firmly established as a major supplier of a wide range of financial services to millions of people around the world. The 1,200 microfinance institutions (MFIs) that report to the Microfinance Information eXchange (MIX) have 64m borrowers and 33.5m savers, and numbers are growing by 25 per cent a year, more in some countries. Total assets of these MFIs amount to $32bn.
However the sector is also undergoing profound structural change. Its success has attracted billions of dollars of outside investment, fuelling rapid expansion. Convergence is also occurring between MF and mainstream banking as MFIs grow in size and sophistication, and commercial banks enter the market. These trends have boosted the dimension and quality of the MF sector, but also created new pressures of competition and sharper expectations.
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